Investment Manager's Insight: U.S. Construction Spending Falls Unexpectedly in June
In a surprising turn of events, U.S. construction spending took a hit in June due to higher mortgage rates impacting single-family homebuilding. The Commerce Department's Census Bureau reported a 0.3% drop in construction spending, following a revised 0.4% decline in May. This unexpected decrease comes after economists had forecasted a 0.2% increase for June.
Private construction projects saw a similar decline, with spending falling 0.3% in June and 0.4% in the previous month. Residential construction investment dropped by 0.3%, with new single-family construction projects seeing a 1.2% decrease. On the bright side, multi-family housing spending increased by 0.1%.
The recent surge in mortgage rates has dampened homebuilding and sales, but with the Federal Reserve hinting at a possible rate cut in September, there may be hope for a turnaround in the near future. However, rising housing inventory could potentially limit any significant rebound in new construction.
In the non-residential sector, spending on private structures like factories dipped by 0.1% in June. Public construction projects also saw a decrease, with a 0.4% drop in investment. State and local government spending remained unchanged, while federal government project outlays declined by 5.4%.
Overall, the slowdown in construction spending could have implications for the economy and the housing market. It's important to keep an eye on these developments as they could impact investment decisions and financial planning.